5/25/2006 @ 6:00PM

The Enron Era: Perps In Pinstripes

Now that Enron’s Kenneth Lay and Jeffrey Skilling have been convicted, the parade of well-dressed miscreants–the cable TV pioneers, the telecommunications executives, star brokers and even a housekeeping diva who became the Gordon Gekkos for a whole new generation–is over. Will we ever forget the excesses of the 1990s and the people who came to represent them?

Not likely. But Lay and Skilling are special, the guys who kicked the whole thing off back in 2001, when Enron, the world’s largest energy trading company, imploded under their care. Enron crushed the retirement plans of thousands of workers who had invested heavily in the company. The collapse also took with it Arthur Andersen–one of America’s five biggest accounting firms, though the U.S. Supreme Court overturned the conviction in 2005.

In the years since, the country’s been treated to one high-profile executive prosecution after another, the inevitable fallout from of a historic market bust.

Can you remember them all? Star analysts like Jack Grubman, who got nailed for hyping stocks in public while trashing them in private, leaving many individual investors stuck with losers.

Or Martha Stewart, founder of
Martha Stewart Living Omnimedia
, who walked the plank for lying to investigators about a stock trade–not the underlying charge of insider trading. She served her time at “Camp Cupcake”–a minimum security federal prison in West Virginia. She tried to make a comeback by launching her own version of The Apprentice, but the TV show quickly tanked in the ratings. Donald Trump, who created the hit show, grumped, “I wish she would be able to take responsibility for her failure.”

What about John Rigas, founder of Adelphia Communications? He was sentenced in June 2005 to 15 years in prison for his part in a multibillion-dollar fraud that led to the collapse of the nation’s fifth-largest cable company.

To be sure, not every high-profile prosecution ended up with jail time, and most businesspeople have enough common sense and decency to avoid fleecing investors while making a living.

But for those who have lived through the Enron era, it will be hard to erase images of L. Dennis Kozlowki‘s lavish party in Sardinia, complete with an ice replica of Michelangelo’s David dispensing liquor from his . . . well, never mind.
Tyco
shareholders weren’t invited.

Perhaps the ultimate end really comes on Sept. 11, when Lay, 64, and Skilling, 52, will return to court for sentencing. They face more than 150 years each, but are likely to be sentenced to much less. Nevertheless, given their age, it’s possible that their sentences will amount to life behind bars. Bernard Ebbers, 64, received what amounts to a life sentence of 25 years for his part in the WorldCom scandal.

In the years since Enron, business has done some deep soul searching. How could all this happen? What can be done to prevent it? Some would argue that business schools should teach their M.B.A. students how to duck walk with grace when marched out of the office by federal marshals, but other would say that a simple outbreak of honesty and common sense would do the trick. Congress, ever enraptured with complex regulations, is putting its faith in Sarbanes-Oxley, a set of rules that requires executives to personally sign off on audits of a company’s dealings.

Will either work? Maybe until the next big boom. We’ll see what happens after that.